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The Terrorist Financing Fallacy
Think a lack of money will stop groups like al-Qaeda? Not likely
By Leslie Macmillan
Cut off the funding, and terrorism will stop—that’s been the guiding principle behind America’s “war on terror” since September 11, 2001. Over the last decade, the U.S. government claims to have seized $32 million in terrorist funds through freezing assets, prosecuting financiers and shutting down organizations that support terrorism.
Now U.S. counterterrorism experts say that al-Qaeda is out of money and has lost its ability to launch massive, high-casualty attacks. That assertion has been making headlines, including a recent cover story in Forbes magazine.
“The argument is that money is the oxygen of terror. Money is a factor, but it’s not the central factor. Terrorism isn’t expensive,” Ibrahim Warde says. Photo: Alonso Nichols
But the strategy of hitting terrorists in the pocketbook has been oversold, says Ibrahim Warde, an adjunct professor of international business at the Fletcher School and an expert on terrorist financing. He cautions against concluding that simply having depleted the funds of groups like al-Qaeda makes us better positioned to fight them.
“The argument is that money is the oxygen of terror. Money is a factor, but it’s not the central factor,” he says. “Terrorism isn’t expensive.” The sums used to carry out attacks are usually small, he notes, hardly the stuff of Saudi billionaires, Swiss bank accounts and networks of Muslim financiers.
“The real danger is we’re ignoring the real problem—why people launch attacks,” Warde says. “Terrorism is fueled by politics, not money.”
According to the 9/11 Commission Report, none of the post-9/11 attacks cost more than $20,000, and the 9/11 attacks themselves cost about $500,000. Those amounts are not large enough to raise a red flag in the formal banking system, says Warde, who notes that “none of the attacks since 9/11 has been foiled through the money trail.”
In his book The Price of Fear: The Truth Behind the Financial War on Terror (University of California Press, 2007), Warde argues that going after terrorist funding is expensive, time consuming and largely unproductive. What’s more, the prosecution of legitimate businesses and charitable organizations has engendered much ill will against the U.S. in the Islamic world, alienating the very hearts and minds we are trying to win.
So why has a U.S. government bureaucracy been created to chase down the terrorist money trail? “After 9/11, Bush said, ‘Let’s round up all the usual suspects and go freeze their assets.’ Given the mood at the time, no one could argue,” says Warde. “The financial front became the first front in the war on terror.”
The Saudi Connection
In the weeks following September 11, a fearful U.S. public demanded that the government take swift action to prevent further attacks, says Warde. A military retaliation would take time. Focusing on the money worked “because the argument was plausible. They knew that Osama bin Laden was involved, and ‘Saudi’ is a synonym [for] money,” he says. “Freezing assets was more part of the so-called security theater. It was one of those measures taken to reassure the public at a time of great panic.”
Sixteen government agencies became involved in tracking down terrorist funding, including the departments of State, Treasury and Justice, and many were given expanded powers to fight terrorism. Regulatory agencies, for example, put new rules in place to spot suspicious financial transactions.
The Holy Grail in this war, the “big trophy,” as Warde calls it, was bin Laden’s alleged $300 million war chest. “It became a whole cottage industry, and a number of people claiming to be great terrorism experts came up with theories about where that money is,” says Warde. “There was a lot of overreach by financial warriors, and a lot of hollow victories were declared.”
Yet the evidence suggested that bin Laden’s millions did not even exist. Warde cites the 9/11 Commission Report, which found that in 1999, an official American delegation to Saudi Arabia was given access to bin Laden’s banking records. They discovered that in 1994, his brothers forced him to sell his share of the family construction business, and the money he got from the sale was seized by the Saudi government.
Even so, the U.S. was wise to put the squeeze on terrorist funding, says Bill Martel, an associate professor of international security studies at the Fletcher School. He says the government “was acting on intelligence that al-Qaeda was willing to pay $100 million in cash for a nuclear weapon.” And the group indeed may have been well off, with or without bin Laden’s fortune. The CIA estimates that al-Qaeda was operating with an annual budget of $30 million before September 11, with most of its money coming from rich Arab donors, according to the 9/11 Commission Report.
“I agree that money alone doesn’t make organizations,” says Martel. “But it does make them more powerful and more capable.”
Warde does not believe the efforts to fight terror financing have been completely ineffective. “Some of the measures taken were necessary. In fact they were long overdue, in terms of controlling financial flows,” he says. “There’s nothing wrong with pursuing the money trail,” he points out. “But it should be part of a larger initiative that also involves diplomacy.”
Making Crime Pay
Warde says that the financial crackdowns have only driven terrorist groups like al-Qaeda underground. They’re now relying on operatives who can fund themselves and also turning to illegal sources of revenue.
“One of the things these groups do, and you see it in Afghanistan, is if they can’t finance themselves through states, they finance themselves in other ways—drugs, crime,” says Richard Shultz, a professor of international politics and an expert on national security at the Fletcher School.
“It’s kind of like the mouse in the mousetrap,” Shultz says. “Every time you build a good mousetrap, you catch some mice. But then the mice figure it out,” he says. “They adapt, and they’re getting into your pantry. So you have to adapt to their tactics. Rather than building a better mousetrap, you find out where the nest is and chase them out.”
Al-Qaeda appears to have adapted to diminished funding, U.S. intelligence officials told two congressional panels in early February. The group is turning to small-scale, low-tech operations using lone operatives and conventional weapons, such as improvised explosive devices (IEDs), which are responsible for half of all coalition casualties in Iraq.
Despite these developments, the fight against terror funding continues under President Obama in much the same way as it did during the Bush administration—through the formal banking system. “To change the way the U.S. goes after terrorist funding now, Obama would be expending political capital for zero political gain,” Warde says, citing what he calls the “hawkish” nature of the Treasury Department, which has led the financial operation to date.
Attacks will continue as long as there are people with access to bits of wire and munitions, people with a certain contempt for the U.S. and not much to lose, Warde says. “There will always be people willing to blow themselves up.”
Leslie Macmillan can be reached at leslie.macmillan@tufts.edu.
